It’s Time to Take Retirement Seriously

By Siba Njoba FSA™, Wealth Manager at Imvelo Wealth Solutions

Retirement is an important issue and you need to give it due consideration. Yes, I know I sound that school teacher who was always scolding you about not doing your homework, but hear me out… 

The tragedy is that for most South Africans, retirement will always be out of reach. Most of us simply don’t save at all, and the few who do remain largely disengaged from the process. It doesn’t have to be like this! Planning for your retirement is enlightening and empowering. It can even be fun. 

Here are some important things to consider, and a timeline check-list to help you as you get closer to that momentous date. 

Retirement realities

Take note of income adjustment. When you retire, chances are you will have finished paying school fees and your kids will have moved out of home, so you’ll need less per month to live on. But how much less? In most cases, post-retirement income is about 50% to 75% of your “normal” income. That’s still quite a lot, so you have to make sure you have enough capital saved. Speak to a Certified Financial Planner® and make sure you understand exactly how much capital you’ll need before you can say farewell to work. 

Look at your income options. As you approach retirement, you’ll have to decide how much of your savings you’d like to draw as a lump sum, and how much to use for an annuity, which will pay you an income each month. There are tax implications and you need to understand them! Again, consult with a financial planner and decide on a solution that complements your lifestyle and financial circumstances.

Build up some cash reserves. Once you’ve completed your retirement claim form with your employer, the admin process linked to your retirement pay-out can take anything from four to six weeks, or up to six months or longer if you’re a member of the Government Employees Pension Fund (GEPF) and you elect to retire out of this fund. This period of waiting can be financially stressful if you haven’t made provision for it.

Decide when. A common mistake that people make is that they decide to retire too early, when they haven’t saved enough to do so. Remember, you’ll probably end up living much longer than your grandparents did thanks to modern medicine – you need to plan for those extra years and make sure you have adequate capital saved in the right places.  

Check in with your feelings. You might be old enough, but are you actually ready to retire? Retirement is a a period of redefining your worth without a job or title. How will you continue to contribute to society? Do you want to spend your golden years with your family, taking care of the grandchildren? Remember that book you’ve always wanted to write, and those places you’ve always dreamt of travelling to? Ask yourself, what preparations am I making now to achieve those dreams?

Health is the new wealth. Sorry to say but you’re not a spring chicken anymore! Make sure you have sufficient medical aid and gap cover, considering the potential health issues for older people. At the same time, try to stay as healthy as possible. Physical health is linked to emotional wellbeing, and emotional wellbeing depends on the quality of your retired life. It’s all connected.

Manage your debt. As you get closer to retirement, start lowering or getting rid of your debt. Try to settle your bond and vehicle repayments and don’t take on any new debt. 

The clock is ticking!

Five years to retirement… This is a crucial phase. It’s important to meet regularly with your financial planner to determine the amount of capital you’ll need to lead a comfortable life until well into old age, taking inflation into account. You might have to increase your retirement fund contributions to hit this target.

Two years to six months before… Ensure that your medical aid meets all your potential medical requirements and go over your entire financial plan again, including your estate plan. Make sure your Will is updated. 

Six weeks to go… The excitement is building! Make sure all your retirement paperwork is completed correctly and submit it to your HR manager to avoid processing delays.

I’ll leave you with a final thought: Retirement is a gift, and planning for it is actually not too complicated with the right advice. Don’t wait – get started today!  You can access a list of financial planners on the FPI’s website 

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